Free «Final Markets and Institutions Case Study Analysis Paper» UK Essay Paper
Client Company Profile
Bright Future Toy is a company that deals with the manufacturing and exportation of various stationary and toys throughout the world. The company has its main offices located in Mainland China in a town called Zhejiang. Its main products are toys, which include DIY and plastic toys, stationary, kitchen plastics that are made for house ware and are produced for export purposes only. Other products include party plastic products like disposable plastic cups and plates. The company has spread and has conquered markets in Oceania, North America and Western Europe. The company consists of less than five engineers in the research and development department.
As part of the management of the insuring company, there is the presence of key problems that arise when a particular company demands insurance. Moral hazards lead the way and cover the relevant disincentives that are created by the insurance given to individuals so as to adopt measures that would lead to the reduction of the healthcare required. In addition, this scenario may occur if an additional healthcare quality is demanded which may result from the decrease in the subsidiary healthcare net price which is attributed to insurance.
Another scenario that arises is the adverse selection. This situation normally results from asymmetric information that involves the ability of individuals to purchase insurance at specific rates that are deemed to be below the known fair prices which is also inclusive of the loading costs. This scenario also occurs when the firm seeking to provide insurance to high risk customers who are more knowledgeable about their particular health status as opposed to what the insurance company knows, prefer a subscription of an insured group which comprises lower risk individuals so as to secure relatively low premiums.
Therefore, a moral hazard refers to the situation of accelerated usage of insurance services when conducting risk pooling, therefore, leading to a decrease in the service’s marginal cost, resulting in the price reduction. It is also attribued to the tendency of an individual to alter his normal behavior to be insured, which means that an individual may engage in activities that have adverse health effects when insured than when not insured. For instance, while learning how to skate or to snowboard, majority of people who are involved in these activities often injure their arms and if they were not insured, then they might reconsider their decisions to go in for that specific type of sport.
Organization of the Report
This report, consequently, analyses the Bright Future Toys Company with the aim of identifying which particular insurance covers the insurance company may offer. The first chapter has a general overview of the client company in relation to the number of employees that it comprises. I have also analyzed the capacity of the firm to cater for the particular insurance cover that it will subscribe to in relation to how diverse the company’s operational activities extend. Chapter two highlights an overview of the insurance covers the company can subscribe to and offer the relevant recommendations that would be considered for adoption. Chapter three focuses on the analysis of the company with reference to how it will be able to adopt the insurance covers that have been suggested to it by the insurer company. Chapter four makes concluding remarks on the type of insurance policy adopted and its benefits to the firm.
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In the application of a health insurance coverage plan by the insurer firm, there are various basic factors that need to be considered before different packages are given to the client. The majority of the companies have a designed health care plan that comprises elements such as flu vaccines, over-the-counter drugs, mental health, outpatient doctor, dental cleaning/exams, hospital, surgical and in-hospital medical care. There are various patterns of the coverage of insurance. The losses that may be insured take the form of being random, infrequent, and large and may not necessarily be associated with significant moral hazards.
Firms such as the Kaiser Family Foundation have different rates when it comes to the proportion of the insurance cover offered by the insuring firm and the number of people that have are qualified for the insurance.
Bright Future Toys can, therefore, subscribe to different insurance premiums. It should be noted that various medical expenditures and illness are unpredictable by nature. Various expenses that result from uncertainty may include hospitalizations, rehabilitations and other serious injuries may be relatively expensive. It, consequently, becomes clear that risks cannot be avoided, and the majority of the employees may be prone to various risks
Insurance companies risk pool
The companies operate on a policy of spreading risks among the many customers instead of facing the risk itself. Another concept, therefore, arises which becomes necessary. Risk aversion, consequently, is the extent to which a certain amount of income is seen as a risky alternative having the expected level of income. Various health services which are considered elastic may have health gains in the long run, and the consumer may not be able to notice it. Chronic disease management and preventive care often leads to better health in the future, and the relevant health costs are lower. An increment in the price of the health insurance cover may reduce the application and subscription of the cover in the short run but will guarantee benefits in the long one.
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The health insurance that would be given may be categorized into various forms or risks:
Co-insurance: In this particular type of insurance cover, the client will remit a fixed cost usually in percentage form approximately 20% and the insurance company guarantees and caters for the rest.
Deductibles: In this particular type of cover, the patient caters for the expenses in a fixed amount from the pocket and the insurance firm handles any additional costs that may have been incurred.
Maximum/limit: The insurance company caters for all the costs inclusive until a certain threshold or limit is achieved.
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